Techniques for individual and group decision making

Decision making and its two settings

A decision is the choice of one course of action from among the alternatives open to a manager. Decision making runs through every managerial function: a manager decides while planning, organising, staffing, directing and controlling, which is why it is often called the essence of management. Some decisions are taken by one person, usually in a small firm or where the style of management is autocratic; others are taken by a group, such as a committee or the board of directors. The techniques used to evaluate the alternatives range from those that rest on the decision maker's own judgment to quantitative techniques, which aim at a high degree of precision and accuracy. Most can be used by an individual; some are built specially for groups.

Techniques for individual decision making

Judgment-based techniques

1. Standard plans. For routine matters a manager follows guidelines fixed in advance. They allow lower-level managers to take many repetitive decisions quickly, such as a bank branch officer sanctioning a standard gold loan within set limits.
2. Facts. Background facts are the basis for developing and judging alternatives. Facts do not decide anything by themselves; the manager has to process and interpret them.
3. Intuition. Some managers decide quickly by feel or hunch, guided by their beliefs and perceptions. It is cheap and fast, but the chance of a wrong decision is high. Quantitative techniques

These aim at a high degree of precision and accuracy.

1. Queuing theory. It balances the cost of waiting lines against the cost of preventing them, and is used by banks, hospitals and transport services, for example to decide how many ticket counters a metro station should open.
2. Linear programming. It finds the best combination of limited resources, such as machine hours, for a given objective, either maximising benefit or minimising cost.
3. Cost-benefit analysis. Each alternative is weighed in terms of its costs and its benefits, and the one giving the greatest benefit for the cost is chosen. It suits decisions with broad objectives, such as social ones; a state government choosing between two rural health schemes could use it.
4. Marginal analysis and break-even analysis. The additional revenue from an extra unit is compared with its additional cost; profit is greatest where the two are equal. Break-even analysis, a variant, shows the output at which there is neither profit nor loss.
5. Probability, payoff matrices and decision trees. Future events are given probabilities, and these are used in payoff matrices and decision trees to compare alternatives whose outcomes are uncertain. A pharmaceutical firm deciding whether to test a new drug further before launch could map both paths and their likely results.
6. Network analysis. A project is broken into operations arranged in sequence on a network diagram, which shows which activities must finish before others start; PERT and CPM are the common forms.

Techniques for group decision making

1. Brainstorming. A problem is put before a number of managers and each offers ideas for solving it; when the session is over, each idea is examined critically and the useful ones are developed into a solution. It often yields unusual answers to complicated problems. A consumer-goods company naming a new snack brand might begin this way.
2. Delphi technique. A panel of experts is formed, but its members are kept apart and do not know one another's identity. Each answers a prepared questionnaire; the answers are evaluated, points of disagreement are fed back with the reasons, and the rounds are repeated until the opinions converge. It suits long-range questions where experts are spread across places, such as estimating demand for electric buses in Indian cities.
3. Consensus mapping. Used for many-sided problems handled by several task groups. Each group's ideas are sorted into clusters and categories, the facilitators combine the groups' schemes into a single draft map, and the whole group revises that map until it agrees on one solution.
4. Mutual consultation. Meetings and committees bring together the varied ideas of several people, so the decision benefits from specialised knowledge and expert comment.

Choosing between individual and group decisions

Individual decisions are simpler to analyse and quicker to take, and they fit small organisations and routine matters. Group decisions are generally reserved for important issues; they encourage participation, but they take more time and make it harder to fix responsibility. A sensible rule is to keep routine or urgent decisions with one manager and to use group techniques where the problem is complex and its success depends on the commitment of many people.

Conclusion

No single technique suits every decision. Judgment and quantitative tools sharpen the choices of one decision maker, while structured group techniques such as brainstorming, Delphi and consensus mapping draw out the knowledge of many. The manager's task is to fit the technique to the problem, the time available and the people involved.